Don’t Act in Haste and Repent at Leisure…Getting IP Ownership Right the First Time

One of the simplest ways to create an IP right validity issue is to rush the ownership question. It can be easy to do. There’s an overseas meeting to discuss new technology with a potential client next week. The marketers wish to launch a new brand with the company structure and new investor involvement still being considered. We need to file now! Hold on, mistakes are risky and can be avoided.

Later corrections can be tricky or, particularly in the case of trade marks, nearly impossible. The other bad news is that ownership issues may only become evident a long time after filing when that all important deal stalls at the due diligence stage. Ownership issues are a quick way to make potential investors walk away. Careful preparation can avoid such issues. Here’s what to look out for to help get the IP ownership correct at filing.

The Inventors

Inventors must be correctly identified from the start which can be easier said than done, particularly in collaboration and multiple inventor cases. Mobile and deceased inventors add an extra layer of complexity. Documenting the inventive process can greatly assist here.

Assignments from identified inventors to patent applicant(s) are essential. For employees, such assignments may be, and often are, included in employment agreements. Common law or other default positions should not be relied upon. In cases of collaboration with inventors outside the applicant organisation, timely assignments are critical. It’s a patent truth that assignments don’t become any easier to sign with time. Likely delays may result in additional disbursements and possibly additional remuneration to a distant inventor with new priorities.

The Collaborators

It’s critical to ensure collaborators have an agreement stipulating rights and obligations prior to filing. Any loose ends really do need to be tied up as collaborators regularly fall out. Against that, early agreements may often be easier to achieve as goodwill is at its peak – the focus is on opportunities, not risks and costs.

Joint ownership is often considered problematic but is sometimes unavoidable. Most issues can be catered for in advance with a properly drafted agreement between the joint owners. Two key issues to cover here are obligation to take necessary steps to progress IP applications and valid commercialisation options for the collaborators.

Negotiation prior to filing may be necessary but is likely easier than doing it later, particularly if trust is lost through a deliberate filing in an uncertain name.

The Investors

Investors and other important stakeholders, like inventors and key employees, may have different ideas about which entity owns the IP. These issues need to be dealt with prior to filing because later controversies about ownership can be difficult to deal with at a cost, time and emotional level.

Relationships between investors and other stakeholders need to be properly documented in suitable agreements.

Which Entity should own the IP?

Questions often arise in corporate group or collaborative situations about which company should own the IP. This problem may be complicated to resolve if urgent filings are necessary and/or further transactions concerning the IP are planned, for example a divestment or a capital injection in the form of equity. The correct holding entity needs to be identified to avoid later disputes which – needless to say – can be time consuming, costly and ultimately a waste of valuable and generally limited commercialisation resources.

Just to add that such disputes may also require resolution in a public forum which is hardly desirable. For example, doubts over IP ownership could affect investor attitudes and share prices in a listed context. Publication may also cause other forms of commercial disadvantage and could trigger other disputes. Any licensees are unlikely to be happy.

While patent laws typically make incorrect ownership a ground of invalidity, such laws also typically include provision for correction of ownership. Trade mark situations can be trickier. That is, if the named trade mark owner never had a right to use the trade mark, the situation is not typically reversible by assignment.

IP ownership situations can be complicated but careful planning will reduce the key ownership risk to IP value.